In a bid to root out corruption, counterfeit money and tax evasion, Prime Minister Narendra Modi on Nov. 8 announced the replacement of notes worth 500 rupees ($7.30) and 1,000 rupees ($14.60). That move has resulted in a cash shortage, with scores of people lining up outside ATMs and banks to deposit their cash, exchange old notes or withdraw new bills.

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The inconvenience has also pushed people to sign up for digital wallets.

"This is the golden age of investment in digital payments in India," Vijay Shekhar Sharma, chief executive of Paytm parent company One97 Communications, said at a news conference in New Delhi on Wednesday.

The Noida, India-based firm is adding about 500,000 new users daily following Mr. Modi's announcement, according to Mr. Sharma. It added 100,000 a day last month.

The company declined to say how much total money has been added to the platform or how many transactions have taken place in the past, but says it is now registering more than 7 million transactions per day and is on track to complete 2 billion transactions this year.

Paytm now has 158 million users, Mr. Sharma said, up from about 150 million before the government's move.

Mr. Sharma said the service is seeing especially strong usage in Southern Indian cities like Hyderabad and Chennai. While Paytm has long had users in the country's biggest cities, like Delhi, Mumbai and Bangalore, people in the slightly smaller metropolitan areas seem to be adopting digital payments now that valid cash is in short supply.

In addition, there is evidence that amid the proliferation of low-cost smartphones across the country, people in rural areas and from lower income brackets are increasingly using the service.

Paytm is seeing more transactions for tens of rupees for items like food and transportation rather than hundreds of rupees for bigger-ticket items, he said.

Paytm also announced Wednesday that is launching a point of service, or POS, feature that will allow merchants to accept payments from not just wallets on the platform but from credit cards like Visa and MasterCard.

Meanwhile, asked if Patym is seeking new funds to fuel its expansion, Mr. Sharma said the company has plenty of cash on hand and is no hurry to pursue profits in the short term. Asked if he had plans for a public offering, he said any potential listing would not take place "anytime soon."

To be sure, only a small percentage of people in India use digital payments today. Indians have traditionally preferred to save and spend in cash--at least before demonetization--and many of the country's more than 1.2 billion people lack bank accounts.